Okay, good morning. I'm Hans-Petter Mellerud, the CEO and Founder of Zalaris . Joining me today for this webcast presentation on Zalaris Q2 and first-half 2025 results is our CFO, Gunnar Manum. We have had some slight issues with the structure this morning, so sorry for being somewhat delayed. There is a Q&A function that you can use to ask questions, which we will answer at the end of the presentation. Please note that you can access the recording in the investors' section of our website. First, we will look at some of the highlights of the quarter. Q2 marked our strongest second quarter to date, reflecting the continued strength of our strategy and business model. We delivered revenues of NOK 362 million for the quarter and NOK 732 million for the first half of the year, representing 12% and 14% growth, respectively, compared to the same periods last year.
I am being told that we had some slight delays in how the slides are being presented. For your info, you can find a copy of the slide deck on our website. Moving on. Profitability is high, with an adjusted EBIT of NOK 44 million in Q2 and NOK 6 million for H1, corresponding to margins of 12.1% and 13.1%. These results keep us firmly on track to achieve our communicated adjusted EBIT margin target in the range of 13% to 15%. Cash generation strengthened correspondingly, [crosstalk] of NOK 62 million in Q2 and NOK 84 million in H1, further underlining our ability to combine growth with solid financial discipline. New long-term agreements and expansions were closed with an annual contract value of more than NOK 30 million. This robust performance reflects the continued expansion of our customer base, successful cost optimization initiatives, and scalability of our business model.
In May, we paid a dividend of NOK 0.90 per share. Our strategic review initiated at the start of Q2 2024 was concluded in June. The review focused on addressing the following perceived key issues: lower than peer market valuation, limited share liquidity restricting growth through capital markets, increasing exposure to large complex deals where faster market prices could enhance win rates, particularly in Benelux and France, where we currently run direct operations. Despite the review, we constantly delivered on our targets. This execution contributed to a significant increase in our share price, effectively raising the bar for potential proposals. As a result, none of the proposals we received matched the board's value aspirations. As a listed company, we will remain open to external interests.
However, our full attention is now directed towards executing our strategy of delivering on our targets of becoming a top three global provider of multi-country payroll and HR transformation. With our European-developed and hosted solution, we are well positioned to drive further growth in both revenue and profitability. Looking at this slide, I think it's fair to say we promised and we delivered. Back in spring 2023, we launched our group EBIT improvement program with a goal of raising EBIT by NOK 40 million to NOK 50 million within the following months. One year later, after successfully achieving that, we announced an additional ambition to improve EBIT in our German operations by another NOK 40 million, and again, we delivered. These improvements came from implementing our Zalaris 4.0 operating model with a balanced mix of onshore, nearshore, and offshore resources and leveraging automation.
We also benefited from higher margins driven by revenue growth and scalability of our organization and infrastructure. On top of that, new customer sales, implementations, and migrations from legacy platforms onto our multi-tenant peer-to-peer solution added further impact. Importantly, over the past year, our FTE levels have only grown moderately while revenue has exponentially increased. This demonstrates clear efficiency gains. As a result, we now see a fantastic trend over the last 12 months in revenue, EBIT, margin, and cash flow. In fact, the only downward trending lines on our chart are net interest-bearing debt and leverage. Gunnar will speak more about our capital structure optimization later in the presentation. The key takeaway is this: we are all proud of these achievements, and the entire team at Zalaris is committed to keeping up the momentum and continuing to deliver at these levels in the quarters ahead.
Our market success continues to support our growth targets for the next 12 to 24 months. We are seeing both an increase in signings and a stronger pipeline of opportunities. In the Nordic , customers supporting revenue growth and long-term. Finland was added as a new country for one of our large banking clients. In addition, our consultants secured major SuccessFactors projects with a Baltic University and a large Swedish security company. In DACH, as communicated yesterday, we saw companies expanding from payroll processing on their platform to a full people-hub solution covering their operations across Europe. This is giving geographic coverage to an existing client. We also closed a payroll outsourcing deal with a leading baby food brand for their DACH operations and run a full-suite SuccessFactors implementation with one of Germany's largest insurance companies.
For U.K. Ireland, growth continues with recurring managed services revenue from contracts moving into production this quarter. We also won a major SuccessFactors project now under contracting. On top of that, our Ryanair payroll transformation is spanning 13 European countries, and the transformation project of the year by the Global Payroll Association. In APAC, momentum continues with wins at St. Vincent de Paul Society and Beijer Ref, representing almost 2,500 employees. We also went live with Heinemann and Campari, so yes, it is time to party. Our pipeline of new prospects and experienced customers into new JOs remains strong. Our strengthened brand and leadership are helping us capture a larger share of multi-country opportunities out of Europe. Importantly, our current customer base alone represents a TAM of 4X-5X our current revenues through geographic expansion.
As an example, if we fully serve them in U.K. and Ireland, it would add almost 50% to our total managed services revenue. Overall, we're in a strong position delivering today while building. Managed services revenue continued to grow 15% year- over- year, showing the continued strength of our core offering. Over the past eight quarters, managed services has grown from 71% to 77% of total revenue, shifting our mix toward more long-term recurring revenue. We also achieved a net revenue year- on- year in constant currency, as existing customers and functionality on our platform. Growth was broad-based across all regions, with DACH at 14%, Northern Europe 12%, and U.K. Ireland leading with 26%. This performance highlights the resilience of our model and the ability to scale with our customers. Revenue in Zalaris Consulting grew 2% year over year.
This growth was primarily mainly driven by stronger sales in APAC and Poland, but by much U.K. consulting engagement. A key challenge remains talent. Billing and retaining skilled consultants is still a limit to further growth. We've therefore renewed our focus on strategic workforce planning to make sure we recruit, develop, and keep the right resources going forward. It is also important to note that a significant share of our consulting capacity is supporting our managed services business through customer transformation projects and change order execution, in particular relating to our German and U.K. consulting businesses. With this, I hand over to our CFO, Gunnar Manum, who will take you through the financial part of the presentation.
This slide highlights our 4% year-on-year revenue increase for the quarter, marking our strongest second quarter yet. Typically, the second quarter has lower revenue and EBIT than other quarters, and this is particularly the case for Zalaris Consulting. The revenue for the second quarter was NOK 362 million, an increase year on year of 10% when measured in constant currency. Revenue in managed services grew by 5%, consulting grew by 2%. The increase in managed services was mainly driven by revenue from new customers that have gone live since the second quarter last year, and additional services and increased change orders from existing customers. The primary reason for the increase in Zalaris Consulting revenue compared to last year was higher revenue in APAC and Poland, partly offset by a reduction in the U.K. and Germany.
The reduction was primarily attributed to the delays in some large projects in Germany, as well as the partial completion of a significant consulting project in the U.K. Net retention in managed services was approximately 103% for the quarter. Looking ahead, we continue to have strong revenue with 2026, with a project revenue increase of more than 15% compared to full-year 2024. The chart illustrates our anticipated growth by the total net annual revenue is NOK 75 million. The top graph illustrates the annual run rate for recurring revenue for managed services as of Q2 of NOK 998 million. Additionally, NOK 75 million net new annual revenue from assigned contracts and expansions is expected to have full effect from Q3 2026. The bottom graph shows the estimated timing of this additional revenue.
In addition to the estimated recurring revenue from managed services, we have change orders totaling approximately 12% of recurring revenue, and the revenues from Zalaris Consulting for the last 12 months were NOK 346 million. This resulted in an estimated future annual revenue of minimum NOK 1.5 billion based on the average currency rates in the second quarter. This slide shows our adjusted EBIT for the quarter, reflecting the increased revenue and operational improvements achieved, particularly in Germany. As noted earlier, revenue and EBIT in the second quarter are normally lower than in other quarters, hence the decrease from the first quarter. This is particularly the case for Zalaris Consulting. The German improvement initiatives announced in the second quarter of last year are yielding positive results, with EBIT increasing by approximately NOK 60 million compared to the prior 12-month period.
This improvement significantly exceeds our previously communicated target of NOK 40 million in EBIT improvements. The second quarter adjusted EBIT was NOK 43.9 million, an increase of 55% year- on- year, with an adjusted EBIT margin of 12.1%, up from 8%. The adjusted EBIT for Managed Services was NOK 47.7 million, which was NOK 14.3 million more than last year, mainly due to the factors just mentioned. The adjusted EBIT for Zalaris Consulting was NOK 4.6 million, NOK 1.9 million higher than last year. The increase is mainly due to higher utilization of internal consultants and less use of external consultants on customer projects. The condensed cost and loss slide provides a detailed overview of our financial performance, highlighting our key cost components.
The increase in license costs is attributed to higher revenue from our payroll and HR solutions and was marginally lower than last year as a percentage of revenue. Revenue per FTE in constant currency grew by approximately 9% year- on- year. However, the significant revenue growth led to a year-on-year increase of 11 FTEs, contributing to higher personnel expenses. A majority of the new FTEs has come from nearshore and offshore locations, and personnel expense as a percentage of revenue decreased by 4.2 percentage points. The reduction was partly due to a lower share-based payments cost compared to the previous year. Other operating expenses decreased by 2.8 percentage points as a share in revenue year- on- year, which was enforced by NOK 14 million in last year. The EBIT was NOK 36.6 million for the quarter compared to NOK 12.3 million last year.
An underlying currency loss of NOK 9.5 million related to the Euro denominated bond loan contributed to a net financial expense of NOK 21.4 million compared to NOK 6.2 million last year, which included an underlying currency gain of NOK 6.6 million. Net profit for the period was NOK 10.8 million compared to NOK 5.3 million last year. The total comprehensive income for the quarter was NOK 24.1 million compared to a loss of NOK 0.2 million last year. The net operating cash flow grew significantly in the quarter, from NOK 44 million to NOK 862 million for the quarter. The chart illustrates the growth in our cash balance from the prior quarter, which increased by NOK 28 million. Strong earnings combined with a reduction in working capital were partially offset by a dividend payment of NOK 19.6 million.
The decrease in net working capital can be attributed in part to a reversal of timing effects highlighted in the first quarter presentation. The net interest-bearing debt, as I said in June, was greater in the quarter to NOK 217 million, which converts to a leverage ratio measured by the net interest-bearing debt divided by the EBITDA. As shown by Hans-Petter, over the past 12 months, EBIT and cash flow have increased significantly, leading to reduced net interest-bearing debts and leverage. The current capital structure and debt financing options are presently being reviewed to reduce financing costs and secure funding for future growth. The goal is to maintain a stable financial foundation and support long-term shareholder value. The first call date for the existing bond is at the end of September 2025. That concludes the financial section. I'd like to turn my presenter out.
Thank you, Gunnar. Let's now turn to our positive outlook for Zalaris, even as we navigate in a landscape shaped by macroeconomic uncertainty. As at our capital markets day in the fall of 2023, we set a growth target of 10% annually, aiming for NOK 1.5 billion run-rate revenue by 2026. We now expect to hit that milestone in 2025, one year early. Most of this growth is evolving even more favorably than expected. Over the past two years, our average annual growth has been about 18%, 14% adjusted for currency. Growth has been fueled by both expansions with existing customers and new managed services contracts. Given this trajectory, we have updated our targets to deliver NOK 2 billion of revenue by 2028 and an EBIT margin of 13% to 15%.
Managed services revenue has grown from 71% to 77% of total revenue in the past eight quarters, and we expect it to reach at least 80% once we achieve the NOK 2 billion. As such, the total share of high-quality recurring revenue is increasing significantly. Our growth strategy remains anchored in multi-country payroll for the mid-market and enterprise customers, evolving HR services and our global capability center, and full suite of SAP consulting services now run as a global business unit. To support this, we're sharpening our land and expand approach, growing with existing accounts and expanding into new geographies. The goal is presence in all G20 countries with full Western Europe coverage as a first step. Currently, Q2 annualized revenue is approaching NOK 1.5 billion, with more than NOK 75 million contracted recurring revenue already secured. With churn at historical levels, our growth trajectory remains solid.
Looking ahead, further improvements will come from AI and automation, moving us closer to fully automated payroll. Continued extraordinary boosts cost efficiency, scale and productivity gains. When we deliver on our NOK 2 billion revenue target, EBIT of 13% to 15% translates to about NOK 260 million- NOK 300 million per annum. With technology-driven efficiencies, we see potential to exceed this margin over time. It is time to sum up. Q2 2025 marked our strongest second quarter to date, reflecting the continued strength of our strategy and business model. We delivered revenues of NOK 362 million for the quarter and NOK 732 million for the first half, representing 12% and 14% growth compared to the same periods last year. Profitability also reached new all-time highs, with adjusted EBIT of NOK 44 million in Q2 and NOK 96 million for H1, corresponding to margins of 12.1% and 13.1%.
These results keep us firmly on track to achieve our communicated adjusted EBIT margin target of 13%- 15%. Cash generation strengthened correspondingly, with net cash flow from operations of NOK 62 million in Q2 and NOK 84 million in H1, further underlining growth with solid financial discipline. New long-term agreements and expansions were closed with an annual contract value of more than NOK 30 million. We are working on optimizing our capital base to reflect our strong cash flow and ability to raise debt at lower rates. This also relates to our ambition to deliver on our dividend policy, targeting a dividend payment of 50% of profit before tax. Plans are being laid to reach our 2028 ambition of being a NOK 2 billion company delivering 13%-1 5% EBIT, with net promoting customers that are supported by an engaged team at Zalaris. Thank you for viewing us today.
Yes, I understand we have some technical issues with also the Q&A function. There is something with the Teams not supporting our great results today. We encourage you to send them to ir@zalaris.com, and we will do our utmost to then come back to you as soon as possible with a good response. Thank you so much again, and thank you for your trust, and have a good day.